Callaway Business Case Study

Research Paper (undergraduate), 2006

10 Pages, Grade: 1.0


Index of contents

1 Golf Equipment Industry

2 Competition

3 Industry Changes

4 Callaway Golf’s strategy

5 Calloway Golf’s financial performance

6 Strengths and Weaknesses

7 Opportunities and Threats


1 Golf Equipment Industry

According to the National Golf Foundation ("NGF"), there are approximately 49 million golfers worldwide, including approximately 25 million in the U.S. In 2005, golfers in the U.S. played an estimated 547 million rounds of golf and are estimated to have spent $5.8 billion on golf equipment, which includes clubs, balls, bags, carts and accessories, including apparel, footwear, gloves, tees, and training devices for putting and driving. While this is positive growth over 2004, the NGF report foresees potential sand traps. The decreasing number of core golfers is hurting the industry, seen specifically in decreases in the number of rounds played, the slowdown in new golf course openings and a stagnant market for golf clubs. Of the 25 million U.S. golfers, about 5.2 million, characterized by the NGF as "avid golfers," play over 25 rounds of golf per year. Avid golfers are the first to seek out performance-oriented golf equipment and generally drive golf club product trends. The leaders in the market consist of: Callaway Golf Company, Fortune Brands Inc., TaylorMade-adidas Golf, Bridgestone Sports (USA), Adams Golf, Inc., Table 3-1 Karsten Manufacturing Corporation Product Line, Mizuno USA Inc., Nike Inc., Roger Cleveland Golf Company, Inc., Carbite Inc., Graphite Design International Inc., Aldila Inc., Royal Precision Inc. . In the golf equipment industry, sales to retailers are generally seasonal due to lower demand in the retail market in the cold weather months covered by the fourth and first quarters.

2 Competition

In general, the golf equipment market can be divided in the golf club market and the golf ball market. Both markets are highly competitive and are served by a number of well­established and well­financed companies with recognized brand names, as well as new companies with popular products. With respect to drivers, fairway woods and irons, the competitors are Callaway, TaylorMade, Titleist, Cobra, Cleveland, Ping, Mizuno and Nike. For putters, the competitors are Callaway, Ping, Titleist and TaylorMade. In addition, the companies also compete with Dunlop, Bridgestone and PRGR among others in Japan and throughout Asia.

The golf ball business competitors include Callaway, Acushnet (Titleist and Pinnacle), Sumitomo Rubber Industries (Dunlop and Srixon), Bridgestone (Bridgestone and Precept), Nike, TaylorMade (MaxFli) and others. These competitors have established market share in the golf ball business, with Acushnet having a market share of over 50% of the golf ball business in the United States.

For both golf clubs and golf balls, the companies generally compete on the basis of technology, quality, performance, customer service and price. Additionally, in competition for a share of the market, various manufacturers have developed golf clubs using various materials, differing types of construction and the latest engineering technology. In order to gauge the effectiveness of companies’ response to such factors, management receives and evaluates company­generated market research for U.S. and foreign markets, as well as periodic public, as well as customized, market research for U.S. markets.

3 Industry Changes

Industry specialists believe that golf equipment sales will continue to grow in the future due to a number of factors including:

- Increasing availability of golf facilities: According to the NGF, approximately many new golf courses, the vast majority of which will be available to the public, are expected to open in the U.S. . Specialists believe that these additional facilities will make golf more accessible and convenient, leading to a further increase in golf participation rates.
- Increasing interest from non-traditional golfers: The game of golf has become increasingly attractive to segments of the population that have not historically been well-represented among golfers. Most notably, Tiger Woods has made golf more appealing to junior and minority golfers. According to the NGF, the total number of beginning and junior golfers increased by over 40% compared to the previous year. In addition, the success of the Ladies Professional Golf Association (the "LPGA") Tour and such female golfers as Annika Sorenstam of Sweden have increased the appeal of the sport to women.
- Favorable population trends: Two population trends are likely to benefit the golf industry over the next several years: (i) the aging of Baby Boomers (those born between 1946 and 1964) and (ii) the emergence of the Echo Boom generation (those born between 1977 and 1995). As golfers age, they tend to play golf more often and spend more money on the sport, particularly in the over-50 age group. Accordingly, because a majority of Baby Boomers are entering their 40s and 50s, the Company expects interest in and spending on golf to increase. Further, because Echo Boomers are beginning to enter their 20s, the age most golfers begin to play the sport, the Company believes they will further increase their participation in and spending on golf.
- New product innovations: In recent years, the golf equipment industry has made significant advances in product designs and technologies to enhance golfers' performance and overall enjoyment of the game. This rapid evolution of golf clubs accelerates the rate at which golfers purchase new or additional clubs.
- Growth in fairway woods: Sales of fairway woods are growing for a number of reasons. Fairway woods have proven to be more versatile and dependable than long irons (specifically, the 1-4 irons), whichmany golfers find inherently difficult to hit. In addition, an increasing number of professional golfers on each of the Professional Golf Association ("PGA"), LPGA, Senior PGA and Nike Tours are carrying multiple fairway woods in competition, thereby validating the use of fairway woods as an accepted substitute for long irons. Finally, changes in course architectures and turf maintenance techniques are placing a premium on shots that fly higher and land softer (I.E., the types of shots typically produced by fairway woods).

4 Callaway Golf’s strategy

The introduction of new, innovative golf clubs and golf balls is important to the company’s future success. A major portion of the Callaway revenues is generated by products that are less than two years old. That is why the company has not limited itself in its research efforts by trying to duplicate designs that are traditional or conventional and it has created a work environment in which new ideas are valued and explored.

A golf equipment manufacturer’s ability to compete is in part dependent upon its ability to satisfy the various subjective requirements of golfers, including a golf club’s and golf ball’s look and “feel”, and the level of acceptance that a golf club and ball has among professional and recreational golfers. Callaway strategy is to identify such customer needs and to bring appropriate solutions into the market.

Besides competing through quality on the product level, the company’s strategy is to increase its presence on golf’s major professional tours.

5 Calloway Golf’s financial performance

Over the past year Callaway has seen their net income become negative. This is because their selling and administrative expenses have gone up proportionally to past years and also because their cost of revenue (which includes direct materials, direct labor, and overhead) has gone up as well. Their current revenues are $998.093M more than the industry average. In 2004, Callaway’s cost of revenue went up 46.47% while their revenue only went up 14.8%. The cost of manufacturing of their new products and the R&D expenses of creating them seem to be outweighting the return they receive from them. Callaway also lost market share in their drivers and woods till then. From 2001 to 2003 Callaway outperformed the industry, with positive percent changes in their price. But in 2004, Callaway did drop below the industry average. In 2005 Callaway reached back above the industry making positive gains.


Excerpt out of 10 pages


Callaway Business Case Study
Western Carolina University
Marketing Management & Mature Consumers
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ISBN (eBook)
ISBN (Book)
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481 KB
Callaway, Business, Case, Study, Marketing, Management, Mature, Consumers
Quote paper
M.B.A. Nihat Canak (Author), 2006, Callaway Business Case Study, Munich, GRIN Verlag,


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